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Forex - Dollar Drifts Higher as Robust GDP, China Bounce Lift Mood

Published 03/01/2019, 02:56 AM
Updated 03/01/2019, 02:56 AM
© Reuters.

Investing.com -- The dollar is drifting higher against other major currencies in early trading in Europe Friday, after a broadly upbeat reading for U.S. gross domestic product was followed by a surprise bounce in Chinese factory activity.

The news that the U.S. economy had grown by an annualized 2.6% in the fourth quarter – and by over 3% for the full year for the first time since 2005 – drove 10-year Treasury yields yields to a three-week high, supporting demand for the greenback.

It then strengthened further overnight, hitting a 10-week high against the Japanese yen after a disappointing slide in household confidence in Japan. By 03:00 ET, the dollar was at 111.81 yen, only just below the intra-day high.

The yen had also been weakened by more encouraging data from China’s Caixin manufacturing survey early Friday, encouraging to traders to put on more yen-funded carry trades. The general improvement in risk appetite also lifted the Aussie and the kiwi a touch.

Further purchasing manager indexes are due throughout the morning in Europe, along with February jobless data from Germany and Italy and monetary and lending data from the U.K. for January.

A little more confidence is also returning to the euro, which is now up more than a cent from its February low against the dollar, thanks to signs of progress on Brexit and, at the edges, signs that the economy may be bottoming out. German retail sales data for January, released earlier, rose by a surprisingly large 3.3% on the month.

The British pound, meanwhile, is taking a breather after hitting its highest against the euro in nearly two years on Thursday after U.K. regulators confirmed a long grace period for financial firms adapting to new rules after Brexit. The move – which still needs confirmation from the U.K. government – further reduces the risk of a disorderly split from the European Union. Against the dollar, the pound is consolidating its recent gains around the $1.3250 level.

Latest comments

Lol everything is robust when forecasts are heavily downgraded to prevent crash. What a joke
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